General Practice, Solo & Small Firm Division

A service of the ABA General Practice, Solo & Small Firm Division

Law Trends & News

Practice Area Newsletter

American Bar Association - Defending Liberty, Pursuing Justice

March 2008

Vol. 4, No. 2

Real Estate

 

Investigating Real Estate Scams: What to Look For

Foreclosure Rescue Scams

  • Are mortgage payments behind?
  • Have foreclosure proceedings commenced?
  • Is the “helper” unsolicited?
  • Is there a “temporary” title change?
  • Can the buyer stay in the home?
  • Is there a leaseback arrangement?
  • Did the buyer pay the homeowner fair market value?

Mortgage Elimination

  • How much does it cost to use the service?
  • How quickly does the mortgage “go away”?
  • Are there promises of loopholes?

Home Improvement Fraud

  • Is there a home improvement loan?
  • In whose name is the loan?
  • Does the person who took out the loan own the property?

Equity Skimming

  • How much is the mortgage on the property?
  • Does the mortgage reflect fair market value?
  • How much did the buyer pay the seller for the property? Is it the same as the mortgage?

Illegal Flipping

  • When was the property purchased?
  • When was it sold?
  • Does the selling price reflect fair market value?
  • Does the selling price reflect the appraised value based upon an independent appraiser?

Equity Fraud

  • Whose name is on the mortgage or loan documents?
  • How much equity is there in the property?
  • How much is the property worth?

Fraudulent Loan Origination

  • What is the credit score upon which the loan terms are based?
  • What is the buyer’s debt-to-income ratio?
  • What is the selling price of the property?
  • What is the monthly mortgage?

Land Fraud

  • Is the offer to purchase the land unsolicited?
  • How long has the seller owned the property?
  • Has the property been inspected?
  • What is the asking price for the land?
  • Does the asking price reflect the fair market value?

Rental Fraud

  • Is there a “satisfaction of loan” recorded in the land records?
  • Research the authenticity of the satisfaction by contacting respective parties.
  • Was the satisfaction filed by the renter of the property?
  • Are there any other encumbrances against the property?
  • Did the renter take out any loans against the property?

Straw-Man Scheme

  • Is there a third party involved in the transaction who orchestrates the deal?
  • Is the loan based upon the credit history of a “middle man”?
  • Does the “middle man” sign over the deed to the property to the third party?
  • Does the “middle man” receive a small percentage of the proceeds of the sale?

Counseling Agencies

  • Is the offer to help unsolicited?
  • Is the agency promising to assist with saving money on the mortgage?
  • Can the information be obtained from a free source?
  • What is the agency’s fee for the services obtained?

Predatory Lending

  • Is there a promise of a loan for “no money down” or “no credit check”?
  • Have other lenders been consulted?
  • What is the fair market value of the property being purchasing or refinanced?
  • What is the interest rate of the loan?
  • What are the fees and penalties associated with the loan?

Aggressive Sales

  • Is the property in danger of foreclosure or governmental sanctions?
  • What is the fair market value of the property?
  • What other options are available to the “troubled party”?
  • Where there any conveyances to the company/individual that is going to help the troubled party?

Arnettia S. Wright, principal of Wright Law Group, P.C., in Washington, D.C., handles primarily real estate and trust and estate matters. She is a fellow of the ABA’s RPTE Section. Devona K. Wade is a paralegal at Wright Law Group, P.C., in Washington, D.C.

© Copyright 2008, American Bar Association.